Correlation Between Australian Agricultural and EMERSON ELECTRIC
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and EMERSON ELECTRIC at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Australian Agricultural and EMERSON ELECTRIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and EMERSON ELECTRIC, you can compare the effects of market volatilities on Australian Agricultural and EMERSON ELECTRIC and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Australian Agricultural with a short position of EMERSON ELECTRIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and EMERSON ELECTRIC.
Diversification Opportunities for Australian Agricultural and EMERSON ELECTRIC
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Australian and EMERSON is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural and EMERSON ELECTRIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMERSON ELECTRIC and Australian Agricultural is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Australian Agricultural are associated (or correlated) with EMERSON ELECTRIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMERSON ELECTRIC has no effect on the direction of Australian Agricultural i.e., Australian Agricultural and EMERSON ELECTRIC go up and down completely randomly.
Pair Corralation between Australian Agricultural and EMERSON ELECTRIC
Assuming the 90 days horizon Australian Agricultural is expected to generate 5.73 times less return on investment than EMERSON ELECTRIC. In addition to that, Australian Agricultural is 1.11 times more volatile than EMERSON ELECTRIC. It trades about 0.02 of its total potential returns per unit of risk. EMERSON ELECTRIC is currently generating about 0.11 per unit of volatility. If you would invest 7,964 in EMERSON ELECTRIC on September 14, 2024 and sell it today you would earn a total of 4,494 from holding EMERSON ELECTRIC or generate 56.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.64% |
| Values | Daily Returns |
Australian Agricultural vs. EMERSON ELECTRIC
Performance |
| Timeline |
| Australian Agricultural |
| EMERSON ELECTRIC |
Australian Agricultural and EMERSON ELECTRIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and EMERSON ELECTRIC
The main advantage of trading using opposite Australian Agricultural and EMERSON ELECTRIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, EMERSON ELECTRIC can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in EMERSON ELECTRIC will offset losses from the drop in EMERSON ELECTRIC's long position.| Australian Agricultural vs. Tyson Foods | Australian Agricultural vs. Mowi ASA | Australian Agricultural vs. SalMar ASA | Australian Agricultural vs. Superior Plus Corp |
| EMERSON ELECTRIC vs. Chesapeake Utilities | EMERSON ELECTRIC vs. MSAD INSURANCE | EMERSON ELECTRIC vs. Goosehead Insurance | EMERSON ELECTRIC vs. Insurance Australia Group |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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